Lukewarm start to coffee reforms drive puts farmers on edge

The National Coffee Cooperative Union Chairman Francis Ngone flanked by other board members address the press after coffee stakeholders consultative meeting. [Collins Kweyu, Standard]

A few months after the Kenya Kwanza administration embarked on a coffee sector reform journey, impatient farmers now want the proposed changes fast-tracked.

The farmers say they fear cartels might hijack the process midway, derailing the much-awaited reforms.

Successive regimes, including the current Kenya Kwanza administration, have blamed unnamed cartels for running down the sector, which was once a leading foreign exchange earner.  The result has been low earnings, which have seen thousands of farmers abandon the crop.

It is against this backdrop that the President William Ruto administration has embarked on a coffee sector reform journey, hoping that it can take on the challenges crippling the once vibrant industry. On Friday, farmers asked the government not to go back on its pledge to take on the coffee cartels, who have been fleecing them (farmers) for decades.

The National Coffee Cooperative Union (NACCU), which is the umbrella body for over 800,000 small-scale coffee farmers, asked Deputy President Rigathi Gachagua, under whose coffee reforms docket falls, and Agriculture Cabinet Secretary Mithika Linturi, not to relent in the ongoing fight to reform the sector.

“We are pleading with the Deputy President Rigathi Gachagua and the Agriculture Cabinet Secretary not to be swayed by interested parties,” NACCU Chairman Francis Ngone said.

“They should push ahead with the reforms so that we the farmers can benefit.” President Ruto earlier this year moved the coffee reforms docket to the Deputy President’s office.

It was previously under the Executive Office of the President.

“The President has instructed me to lead reforms in the tea, coffee, and milk sub sectors. This is aimed at putting more money in the pockets of farmers by linking them directly to consumers. The cartels are ruthless, but we will stop at nothing,” said Gachagua following the announcement.

The calls came in response to this week’s Coffee Stakeholders Consultative meeting hosted in conjunction with the Agriculture and Food Authority (AFA). An earlier forum that was held in Nairobi claimed the reforms had been rushed and should be restructured.

But Mr Ngone dismissed the claims, saying the reforms - which started in 2016 - had been consultative, adding that they are in the interest of all small-scale coffee farmers, and their implementation will lift their incomes.

Under the new reforms, 11 coffee cooperative unions have been licensed to sell coffee directly at the Nairobi Coffee Exchange (NCE) and overseas - eliminating the need for a middleman between the farmer and the buyer.

Under the new Kenya Kwanza-backed changes, the Capital Markets Authority (CMA) has been entrenched as the regulator of the NCE. The regulator is expected to oversee a transparent and efficient price discovery process that benefits farmers. The entry of farmer-owned coffee brokerage companies on the NCE trading floor has been billed as a game changer.

Under the new regime, NCE revealed last week it plans to put up a coffee cupping laboratory to streamline the pricing of the commodity.

Cupping is the measurement of physical and organoleptic characteristics of coffee, which allows the evaluation of the attributes, qualities and defects of the grain.

It is, therefore, a tool for quality control during the product’s processing. A cupping lab provides technical analysis of samples obtained through coffee growers, understanding the behaviour of crop quality and the most relevant aspects of the grain.

Through this process, NCE said it will determine the value of the commodity vis-a-vis what the buyer is offering and the reserve price.

NCE Management Board Chairman Peter Gikonyo said having the buyer do the cupping alone leads to price variations with no scientific backing.

This might disadvantage the farmer. Mr Gikonyo, who was giving an update on the ongoing coffee reforms flanked by NCE acting Chief Executive Lisper Ndung’u in Nairobi, also explained why auction volumes for August dropped. Shared data from the Exchange shows volumes traded in August this year were 192 tonnes compared to 4,380 tonnes in August 2022, which is a drop of 95.62 per cent.

The average price in August 2023 was $183.41 (Sh25,620) per 50kg bag compared to $266.32 (Sh37,240) in August 2022, a 31.13 per cent drop.

Mr Gikonyo said for growers to get value for their produce, NCE needs to have a cupping lab.

This is a laboratory where coffee is evaluated by professionals and buyers by analysing the taste, texture, aroma, and acidity, among other components which end up determining the value.

Having a cupping lab, he said, would ensure farmers through their respective representatives can share their data, and NCE would make the cupping notes available as well.

“That brings us closer to when the price setting is done, and the reserve prices are being fixed. It means we will be able to see what the deviation from what the buyer is offering and what is being offered or what is the reserve price,” said Mr Gikonyo. This would then determine the actual value of the coffee. “But when you have the buyer doing the cupping and the seller is not doing so, you get a variation (of price) that cannot be supported,” he noted.

“That is why we are calling upon the establishment of a cupping laboratory to ensure transparency so that business becomes more stable and we win more confidence in the industry.”

Beans from small Kenyan farms end up in speciality coffees from Berlin to San Francisco. But low prices, rising temperatures, and erratic rainfall are pushing farmers to the brink.

More than 800,000 farmers and another five million Kenyans are employed by the industry and continue to suffer low incomes due to a dysfunctional system that appears to favour middlemen and other “cartel” members.

Coffee was at some point a leading foreign exchange earner, accounting for 40 per cent of forex earnings, but production has dropped over the years.

The crop raked in Sh27 billion in 2022, up from Sh17 billion in 2021, a negligible contribution to Kenya’s total exports of Sh873 billion last year. Coffee production stood at 52,000 tonnes in 2022 according to data by the Kenya National Bureau of Statistics (KNBS).

Coffee Bill

Former President Uhuru Kenyatta in March 2021 issued an executive order, which envisioned reforms across different areas, including access to credit for farmers and the tabling of the Coffee Bill in Parliament.

Among the new approaches to revive the industry was the reintroduction of the Coffee Board of Kenya.

Mr Gikonyo said that if buyers are not interested in doing the cupping and are comfortable with the cupping done at NCE, then they can go on with the trade. “And that gives us an opportunity to open another window where we can now have trading continuously,” he said.